Electric Car Makers to Benefit From Extension of NEV Rebate Program

China’s Ministry of Finance said it would continue the rebates for cleaner energy vehicles through 2020.

China offered a boost to the country's burgeoning electric and hybrid car industries with its recent announcement that it would continue its rebate program for so-called new energy vehicles (NEVs).

China's Ministry of Finance said last week that it would extend the rebates on purchases of NEVs through 2020. The rebates were scheduled to expire at the end of the year.

NEV sales rose a whopping 51 percent over the first 11 months of 2017 and were likely to reach their target of 700,000 vehicles for the full year. But observers of cleaner energy cars had worried that without incentives, consumer demand for these vehicles would lose momentum, and that the government should continue its financial support.

Electric car manufacturers sold 645,000 plug-in, electric vehicles in 2016 in China, more than any other country. With the world's largest population and a growing middle class, the market has a potentially unmatched upside. China has also shifted its focus to cleaner energy products amidst a larger effort to improve its air quality.

China's Ministry of Finance said the rebate extension would help in the "development in new energy vehicles."

In 2019, Chinese auto manufacturers must begin meeting NEV production quotas. That has sparked the launch of new NEV models and a flurry of deals to provide the technology and support systems that such vehicles require.

No fewer than six major, Chinese companies are producing electric cars, including BYD Co. Ltd. (OTCMKTS: BYDDF), SAIC Motor Corp Ltd., Geely Automobile Holdings Ltd., and BAIC Motor Corp Ltd. BYD shares have risen more than 30 percent this year. The company has drawn attention not only for its rapid growth in recent years, but because Warren Buffett owns a 10-percent stake in the firm.

Last week, a smaller competitor in this sector, Kandi Technologies Group Inc. (Nasdaq: KNDI), announced the purchase of Jinhua An Kao Power Technology, a Chinese battery technology manufacturer, for $3.9 million. In November, Kandi Technologies learned that government regulators had added the company's K22 model to two directories as an energy-saving vehicle. Revenues quadrupled in its most recent quarter.

Among Jinhua An Kao's products is a smart battery charging station. Kandi chairman and CEO Hu Xiaoming said the acquisition would give his company a competitive edge in delivering "more innovative products and services to our customers."